Maybe, like me, you started your career at a large public accounting firm. Or maybe you began with a major consulting firm, financial institution or Fortune 500 company. Or maybe you have been working for small businesses all along. Regardless of where we start our careers, finding our way into a small business seems to be part of the natural progression.
My first days as a small business CFO
I became a small business CFO after starting my career with PwC in Philadelphia, followed by a long career at Campbell Soup Company.
I vividly remember my first few days as a new small business CFO, shadowing the CEO in his various meetings and one-on-one updates. During the tail end of my first week, the business development team was hosting its annual planning session, giving me the opportunity to meet everyone and learn about our customers and sales strategies. Of course, being inquisitive by nature, I asked a lot of questions and shared a few suggestions based on my prior experiences.
More than once, someone expressed surprise that I was asking such insightful questions and making meaningful recommendations even though I was just days into the CFO role. From my perspective, neither my questions nor my comments were anything special, but maybe my Fortune 500 training was more impactful than I knew.
Key qualities of a small business CFO
Based on my experience, the following are a few of the key qualities needed to be a successful small business CFO.
Technical skills. Strong technical skills, of course, represent the table stakes. While you will hopefully have a highly competent controller, you will likely be hands-on regarding financial reporting and analysis, risk management, internal control, tax compliance, treasury, external audit and other such matters. And you should be prepared to roll up your sleeves, as you may be approving journal entries, verifying reconciliations, creating spreadsheets and performing other tasks that you likely delegated in your prior ‘big company’ roles.
Analytical ability. Your and your cross-functional partners’ ability to make informed decisions depends upon your ability to solve problems and provide data analysis and insight. For example, I quickly learned that one of our businesses (a recycler) was experiencing declining profitability and a cash crunch despite an increase in sales.
There were only two products, food-grade and non-food-grade recycled plastic resin, and management inherently knew the food-grade resin was more expensive to manufacture. By analyzing production costs, we determined that the cost differential was much higher than previously assumed. And since the increase in volume related to the food-grade resin, the company was losing money on every pound sold.
General business acumen. The more you know about your business, including your company’s products, operations, customers, vendors, competitors and industry overall, the more effective you will be. Indeed, considering the small business CFO’s mandate can be quite broad — often including IT, HR, strategy, risk management and even operational responsibilities — developing business acumen is mission critical.
Curiosity. CFOs are inquisitive by nature, which is especially helpful in a small business environment. You can, for example, enable new thinking and breakthrough ideas by questioning and challenging the status quo.
Or you may simply ensure the company complies with tax and other requirements, keeping yourself out of hot water. Say you have remote employees in another state. You may want to ask if the company is registered to do business in that state and/or if the company is required to file state or local taxes there. You would expect that your CPA partner or payroll provider would have already asked such questions, but you may be (unpleasantly) surprised.
Strategic agility. Strategic goal setting and risk management are critical for any organization. As CFO of a small business with limited resources, the CEO and board expect you to leverage your insight into financial and operational performance, then engage in deep reflection with cross-functional partners to reimagine the business. And they need you to translate this strategic thinking into a meaningful and measurable business plan, including identification and management of potential barriers, or risks, that could impact the team’s ability to deliver the plan.
Results-oriented. There is little room for error in a small business. Consider, for example, cash flow. In a large company, operating cash flow, free cash flow, cash conversion cycle, and similar metrics are important measures to hold people accountable. For a small business, cash is the lifeblood of the organization. Carefully managing and protecting cash flow could be the difference between success and bankruptcy. Thus, the small business CFO must be results-oriented, ensuring cross-functional partners remain focused on meeting their commitments and executing the company’s plans with excellence.
Business partner mentality. Throughout my career at Campbell Soup, collaborating with cross-functional business partners (e.g., to brainstorm a new marketing or sales strategy) was always the highlight. For the small business CFO, having a business partner mentality is critical to the company’s success.
You are an overall leader of, and business partner to, the full executive team. Most importantly, you are the CEO’s sounding board for every major decision. By keeping your finger on the company’s pulse, asking the tough questions and communicating business performance, you can ensure cross-functional partners remain focused on delivering results and support them in course-correcting as needed.
Overall leadership. As CFO, you will likely find yourself to be the CEO’s right hand, or first among equals within the executive leadership team. To that end, you need to be confident, courageous, agile and of high integrity. And you should possess executive presence, emotional intelligence, team building, political savvy, strong communication and other leadership skills.
